Current Marketing Mix
Philip Morris’ Marlboro is currently in the mature life cycle. The cigarette industry as a whole is in this life cycle. The objectives for the mature stage are to extend the life cycle for Marlboro by maintaining the brand leader position, advertising image, and cannibalizing the product. Marlboro needs to watch competition (RJ Reynolds and Brown and Williamson), maintain high brand loyalty to keep brand leadership, and continue with creating a socially conscious company. The creating of this image as a socially conscious company is a company wide customer orientation. What has helped them remain on top is their size advantage, experience, and well-defined target. Some specific areas that Philip Morris needs to focus on are sales growth, profits, customers, and competition. These will be discussed briefly. We will elaborate on the factors product, pricing, promotion, and distribution in greater detail. Marlboro is currently in a growth maturity stage for sales growth. Although the industry is in the mature life cycle, Marlboro still controls a majority of the share and sales are increasing (1999 Annual Report). With the 1998 Master Settlement Agreement, where Philip Morris had to pay a large settlement to past consumers for with holding information about the harmful effects of smoking, sales still increased from 1998 to 1999. This is mostly due to the high brand loyalty of consumers (focus group). As mentioned above, due to the high and unusually strong brand loyalty of the market, profits have increased even with stricter laws and regulations. Pending litigation, smoking could become even more expensive than it already is. Taxes could be imposed to increase price per pack, which would hurt profits if consumers start buying cheaper brands. If government raises the price per pack as a standard and consumers remain brand loyal, profits could increase for the company. Marlboro targets adults over twenty-one and will not use anybody in an advertisement who looks younger than twenty-five. They wish to retain current customers and try to discourage youth smoking. Many smokers start smoking in high school and remain loyal to the brand they start smoking (focus group). Though reality and their strategy are incongruent, they try to target current consumers. The three big competitors in the tobacco industry are Philip Morris (market leader), RJ Reynolds, and Brown and Williamson. Philip Morris (Marlboro) and RJ Reynolds (Camels) own the two main brands. Due to the price increases delegated by the government, cheaper non-premium brands are catching price sensitive customers. If such price increases persist, competition could increase as well. That is only if the prices increase so much that brand loyalty sways. We would like to discuss how these stated strategies of Marlboro effect Porter’s Five Forces. Buyers are an overall weak force in that they are so brand loyal, they will pay inflated prices for product. They do expect more from the parent company that helps explain the Philip Morris Foundation, a community service charity ran by the people of Philip Morris, and the new slogan for Philip Morris, “Working to Make a Difference. The People of Philip Morris.” The main reason buyers are a weak force is because of their strong, unwavering brand loyalty. Competitive rivalry is intense in the tobacco industry. With the changing view of smoking by society from one-time glamorous to now outcast and increasing government restrictions with price increases, the consumer pool is dwindling. Luckily, Philip Morris’ Marlboro has an advantage as brand leader. The three main competitors are struggling to maintain market share, and Philip Morris is succeeding in remaining the market leader. New entrants in the tobacco industry are rare. It is later in the life cycle, so many would-be new entrants are dissuaded by many factors. First is the sheer size of the established competition. They have the upper hand with economies of scale, experience curve, channels of distribution, and high brand loyalty. New entrants also are thwarted from entering the tobacco market by the uncertain future of the market. The pending legal dealings, increased restrictions, and mandated price increases makes the environment risky for new entrants. There are high barriers to entry. Being that the cigarette industry is in the mature life cycle, the number and availability of substitutes should be numerous. There are a few substitutes to cigarettes like chew, snuff, and cigars, but none truly substitute the cigarette. Unlike perfume were the smell is similar enough or clothes that fit well and look nice, the taste and experience of smoking your brand of cigarettes can not be duplicated. This inability to reproduce the experience and taste makes the substitution uncommonly weak for the mature life cycle. As mentioned in the new entrants, channels of distribution are established and the high demand from the brand loyal customers weakens the power of distributors. This is the environment for Marlboro in reference to Porter’s Five Forces. Although it does not follow the text book definition of the mature life cycle, it is due mainly to the unique industry of tobacco. The competitive strategy of Marlboro is differentiation. Marlboro has a perceived uniqueness industry wi
Current Marketing Mix
Philip Morris’ Marlboro is currently in the mature life cycle. The cigarette industry as a whole is in this life cycle. The objectives for the mature stage are to extend the life cycle for Marlboro by maintaining the brand leader position, advertising image, and cannibalizing the product. Marlboro needs to watch competition (RJ Reynolds and Brown and Williamson), maintain high brand loyalty to keep brand leadership, and continue with creating a socially conscious company. The creating of this image as a socially conscious company is a company wide customer orientation. What has helped them remain on top is their size advantage, experience, and well-defined target. Some specific areas that Philip Morris needs to focus on are sales growth, profits, customers, and competition. These will be discussed briefly. We will elaborate on the factors product, pricing, promotion, and distribution in greater detail. Marlboro is currently in a growth maturity stage for sales growth. Although the industry is in the mature life cycle, Marlboro still controls a majority of the share and sales are increasing (1999 Annual Report). With the 1998 Master Settlement Agreement, where Philip Morris had to pay a large settlement to past consumers for with holding information about the harmful effects of smoking, sales still increased from 1998 to 1999. This is mostly due to the high brand loyalty of consumers (focus group). As mentioned above, due to the high and unusually strong brand loyalty of the market, profits have increased even with stricter laws and regulations. Pending litigation, smoking could become even more expensive than it already is. Taxes could be imposed to increase price per pack, which would hurt profits if consumers start buying cheaper brands. If government raises the price per pack as a standard and consumers remain brand loyal, profits could increase for the company. Marlboro targets adults over twenty-one and will not use anybody in an advertisement who looks younger than twenty-five. They wish to retain current customers and try to discourage youth smoking. Many smokers start smoking in high school and remain loyal to the brand they start smoking (focus group). Though reality and their strategy are incongruent, they try to target current consumers. The three big competitors in the tobacco industry are Philip Morris (market leader), RJ Reynolds, and Brown and Williamson. Philip Morris (Marlboro) and RJ Reynolds (Camels) own the two main brands. Due to the price increases delegated by the government, cheaper non-premium brands are catching price sensitive customers. If such price increases persist, competition could increase as well. That is only if the prices increase so much that brand loyalty sways. We would like to discuss how these stated strategies of Marlboro effect Porter’s Five Forces. Buyers are an overall weak force in that they are so brand loyal, they will pay inflated prices for product. They do expect more from the parent company that helps explain the Philip Morris Foundation, a community service charity ran by the people of Philip Morris, and the new slogan for Philip Morris, “Working to Make a Difference. The People of Philip Morris.” The main reason buyers are a weak force is because of their strong, unwavering brand loyalty. Competitive rivalry is intense in the tobacco industry. With the changing view of smoking by society from one-time glamorous to now outcast and increasing government restrictions with price increases, the consumer pool is dwindling. Luckily, Philip Morris’ Marlboro has an advantage as brand leader. The three main competitors are struggling to maintain market share, and Philip Morris is succeeding in remaining the market leader. New entrants in the tobacco industry are rare. It is later in the life cycle, so many would-be new entrants are dissuaded by many factors. First is the sheer size of the established competition. They have the upper hand with economies of scale, experience curve, channels of distribution, and high brand loyalty. New entrants also are thwarted from entering the tobacco market by the uncertain future of the market. The pending legal dealings, increased restrictions, and mandated price increases makes the environment risky for new entrants. There are high barriers to entry. Being that the cigarette industry is in the mature life cycle, the number and availability of substitutes should be numerous. There are a few substitutes to cigarettes like chew, snuff, and cigars, but none truly substitute the cigarette. Unlike perfume were the smell is similar enough or clothes that fit well and look nice, the taste and experience of smoking your brand of cigarettes can not be duplicated. This inability to reproduce the experience and taste makes the substitution uncommonly weak for the mature life cycle. As mentioned in the new entrants, channels of distribution are established and the high demand from the brand loyal customers weakens the power of distributors. This is the environment for Marlboro in reference to Porter’s Five Forces. Although it does not follow the text book definition of the mature life cycle, it is due mainly to the unique industry of tobacco. The competitive strategy of Marlboro is differentiation. Marlboro has a perceived uniqueness industry wi
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